The parents of a young girl, who died in an automobile accident caused by an intoxicated driver, brought a lawsuit against a bar that had served liquor to the impaired man. The complaint alleged negligence in allowing the tavern patron to drive. It did not mention the selling of alcoholic beverages to an intoxicated person.

The bar's general liability insurer denied coverage on the basis of the policy's liquor liability exclusion and filed a declaratory judgment action to determine its obligations to its insured. The trial court, proceeding on the duty to defend issue (having granted a motion by the insured and the parents of the child to dismiss the indemnity issue), commented as follows:

"The Court is faced with a situation in which there is an unambiguous insurance policy containing an unambiguous exclusion clause and an allegation in a petition which does not mention impairment by reason of alcohol. The undisputed facts extraneous to the petition are, however, that (the offending driver's) impaired state was the result of his having consumed numerous alcoholic beverages at the insured's establishment."

Appeal followed the conclusion by the trial court that the insurer did not have an obligation to defend its insured in the underlying lawsuit. The appeal court found it clear that the parents had made no reference to "alcohol" or intoxication in their suit in order to bypass the pertinent liquor liability exclusion. The parents argued that the trial court erred in "looking beyond" their complaint and determining that their claims "ultimately derive from the selling or giving of alcohol to an intoxicated person."

The appeal court quoted from State Farm Fire & Casualty Company v. Wade, 827 S.W.2d 448 (Tex. Civ. App. Corpus Christi 1992) as follows: "When the petition in the underlying lawsuit does not allege facts sufficient for a determination of whether those facts, even if true , are covered by the policy, the evidence adduced at the trial in a declaratory judgment action may be considered along with the allegations in the underlying petition."

The judgment of the trial court was affirmed with respect to its holding that the insurer did not have a defense duty, and modified by a conclusion of the appeal court that the insurer did not have an obligation to provide indemnity when it had no defense duty.

(WESTERN HERITAGE INS. CO., Plaintiff-Appellant-Cross-Appellee v. RIVER ENTERTAINMENT DBA PEPE'S ON THE RIVER ET AL., Defendants-Appellees-Cross-appellants. U.S. Court of Appeals for the Fifth Circuit. No. 92-7682. Aug. 23, 1993. CCH 1993-94 Fire and Casualty Cases, Paragraph 4568.)